Marketing Advice from Experienced Affordable Housing Developers

Considering Local Trends in Housing Development and Marketing

When creating a plan for housing development and subsequent marketing, it makes sense to analyze what buyers want, as well as the larger trends in individual neighborhoods and the surrounding region. Poorly planned development can cause a delay in sales, which is costly to the developer. The best way to ensure sales is to address neighborhood needs and meet buyer preferences, and then promote those items in marketing. The best marketing shows the value of the home and its special features, plus illustrates the promising connections possible between buyers, neighborhoods and the surrounding region.

Housing Development in South Florida

Neighborhood Housing Services of South Florida (NHSSF) will develop 100 single-family homes by June 2013 with funding from the Neighborhood Stabilization Program (NSP), a federal foreclosure response initiative that helps to address vacant or foreclosed properties in distressed communities. Thirty-one properties will be new construction and the rest will be acquisition, rehab and resale. Twenty-seven homes are being developed in one specific neighborhood, Brownsville, a historically middle-class African-American community that is struggling with an older housing stock in need of rehabilitation, an aging population of owner occupants and a number of vacant lots.

All the homes built or rehabbed by NHSSF will include weather resistance features to protect against hurricanes, plus have new, energy-efficient air conditioning systems, new kitchen appliances, a new hot water heater and updated electrical systems. The homes will be for sale only – there are no rental or lease options – and affordable financing is available. Homes are priced around $175,000 to be affordable to buyers at or below 120 percent of the area median income.

Identifying Market Trends

Before creating its plan to utilize NSP funds, NHSSF took the time to consider local market needs and trends. To gain buyer insight, the development team went to its own homebuyer education department to identify the home features that class participants were most interested in, as well as price preferences. (NHSSF graduated 2,200 people from homebuyer education in 2011, so the organization has access to a very large number of potential homebuyers.) In one target area – Dupuis Point, a 27 single-family home subdivision just north of Brownsville – NHSSF conducted a target market study before developing the vacant land to see what types of homes buyers wanted. NHSSF identified several important factors through this analysis and the development team was able to respond to those preferences in construction.

Acknowledging Buyer Preferences. During its research, NHSSF learned that buyers mostly wanted three- or four-bedroom homes with two bathrooms. Homes with only one bathroom were simply undesirable to most. In addition, most families had an aversion to shared walls, which motivated NHSSF to build only single-family, detached homes. Another important preference was related to weather resistance: most buyers wanted a home that was “hurricane ready,” or capable of withstanding strong storms. NHSSF therefore decided to include in all development impact-resistant windows that can withstand winds of up to 160 miles per hour. These windows have additional benefits: they provide solar protection and hold air-conditioned air inside, increasing the home’s overall energy efficiency, plus block noise. Hurricane-resistant windows are more expensive than other options, but the benefits support the investment.

Acknowledging Neighborhood Needs. While planning its development, NHSSF also had to decide on scattered-site versus cluster development. Since ample development opportunities exist in south Florida, NHSSF was able to make individualized plans for its neighborhoods by looking at its overall revitalization needs. In more depressed areas, NHSSF felt that cluster development was critical because building one good home in a bad neighborhood generally doesn’t work. Focusing on cluster development in struggling neighborhoods provides an overall boost to the area and supports marketing – buyers feel good about purchasing a home on a street that is receiving focused attention. On the other hand, stronger neighborhoods may benefit from scattered-site development, which helps keep the neighborhood strong by addressing the occasional eyesore or troubled property.

Subsidy Options

A 20-percent subsidy is built into NHSSF’s NSP homes for sale in the form of a second mortgage – which holds a zero percent interest rate and 20-year term – to increase long-term affordability for the buyer and ensure long-term residency in the home. The loan is fully repayable if the owner sells or rents the home within the first five years after purchase; then, one-fifteenth of the amount is forgiven every year until the 20-year term is up. In addition, Miami Dade County offers a subsidy to borrowers earning 80 percent of the area median income or below, which provides a second mortgage of up to $70,000. Monthly payments are kept very low: typically between $25 and $50 a month. The county also offers down payment and closing cost assistance of up to $10,000 for those at or below 120 percent of the area median income. Some local lenders also have Federal Home Loan Bank Affordable Housing Program grants available for low-income buyers. Housing counseling and lending staff at NHSSF work closely with lenders and others to learn about available financing options and make sure that all qualified buyers know about them. The average annual household income of NHSSF buyers is $45,000, and most families need assistance or subsidies to complete the purchase.

Pricing Strategy

When the property is first acquired, NHSSF makes comparisons in the neighborhood and does an initial appraisal. When the work is complete, another appraisal is done and is the basis for the listing price. NHSSF will reduce the purchase price if a home does not sell right away or if an appraisal is somewhat lower than the contract purchase price. Price adjustments, although not often necessary, have typically been between $5,000 and $10,000. If an appraised value is significantly lower than the agreed-upon price, NHSSF may ask the borrower to explore financing through another lender to get another view of the value.

Marketing Team

Marketing at NHSSF is a group effort. The real estate department helps with marketing, as well as NHSSF’s associate director, four senior managers, the sales manager, head of homebuyer education and the director of lending. The team meets every two weeks to talk about NSP progress, and marketing and promotions is always a topic at these meetings. A local graphic artist is hired to do design work and provides marketing campaign ideas. NHSSF reaches out to its homebuyer education participants to find buyers, and includes its for-sale properties on the Multiple Listing Service (MLS).

Marketing Strategy

Two marketing strategies work best in NHSSF’s target area: word of mouth and open houses. Word of mouth is effective because NHSSF has a good reputation in the community; businesses and individuals are familiar with the program and therefore make referrals to its programs and buying opportunities. In addition, the substantial number of homebuyer education participants and guests at local “Lunch and Learn” sessions (held at area businesses) help spread the word about NHSSF’s programs and homes for sale. Open houses are also successful and have proven to be the best way to promote a home for sale.

NHSSF’s marketing message concentrates on the homes’ strongest features: affordability and quality. Fliers created for each available home show it before and after rehab and promote the surrounding neighborhood. NHSSF also highlights that homes are located in communities that buyers can fit into. NHSSF clearly communicates to potential buyers, either during homebuyer education classes or at open houses, that purchasing an NSP home may take more time, but the end result is worth the effort.

Open Houses

NHSSF has a process for hosting open houses that generates excitement around the properties for sale. When an NHSSF house is complete, staff members pick a date for the open house and send postcards to a mailing list of 2,000 recipients including active homebuyer education clients and others. Postcards are sent one week prior to the open house. Open houses are also announced through the MLS and faith-based organizations.

NHSSF hosts a homebuyer education class on the day before the open house (always a Saturday) and promotes the event to that group of class participants. For the open house the following day (Sunday), NHSSF staff prepare the house carefully. The air conditioning is on so the house is comfortable, plus the house is clean, has all new appliances in place and looks beautiful. NHSSF will not show a house until it is “show ready,” meaning the work is complete and the house is move-in ready.

The Tuesday after the open house, NHSSF hosts an NSP orientation to educate people about the NSP program. All interested buyers must attend this orientation. Offers on the home are accepted during the week following the open house on a first-come, first-qualified, first-served basis. Usually, more than one offer is received for each property. The first applicant to meet all requirements is allowed to proceed, plus one back-up applicant is accepted. If more than three offers are made on the same home, NHSSF does a lottery drawing to determine the order in which contracts are reviewed. Offers must be full price and include a pre-approval letter from a lender. In addition, clients must attend the NSP workshop and have confirmation from their NHSSF housing counselor that the monthly payments would be affordable and sustainable.

Planning and Evaluation

To evaluate whether or not marketing strategies are successful, staff ask clients how they found out about NHSSF and the homes for sale. Staff members then discuss what’s working, during regular staff meetings, and make decisions on future activities based on this feedback. NHSSF also pays attention to its marketing output and resulting attendance at events. For example, the postcard mailers go to about 2,000 people and open houses are listed on the MLS, which draws between 15 and 20 people to each event. Typically, open houses produce two to six offers on each property.

To predict the production of its own “ready” buyers, NHSSF examines the number of people taking advantage of its services and compares that with the number of buyers produced each year. NHSSF estimates that out of every 100 people in their homebuyer education classes, about 50 go on to receive individual counseling and of those, approximately 10 will become “mortgage-ready” within one year.

Lessons Learned

  • Do sufficient outreach. Pay attention to your organization’s outreach tactics and the subsequent success in finding a buyer. It is important to know how many people need to be touched by marketing to get enough interest in a home. Having one interested buyer does not mean you’ve sold the house.
  • Embrace marketing strategies that work. NHSSF has found open houses and word of mouth to be very successful. NHSSF also works with local employers, such as hospitals, to conduct “Lunch and Learn” events at which information is provided on NHSSF services including homebuyer education and homes for sale.
  • Show your product in the best way possible: it is much easier to sell a home that looks good. Dress it up, don’t show the home until work is finished and make sure that it’s comfortable inside during a showing or open house. Turn on the heat or the air conditioning depending on the weather that day. You want prospective buyers to be impressed with the home, and to feel relaxed and happy when they walk in the door.
  • Create a sense of urgency. By creating a short timeframe between open houses and acceptance of offers, NHSSF sparks interest in available homes. Because interested buyers must submit a letter of interest within one week of the open house, they are motivated to move promptly. NHSSF moved its open houses to the day after a homebuyer education class to create excitement and attract ready buyers. The topic of homeownership is fresh in people’s minds and participants are energized about the prospect of buying a home. Pay attention to the days and times that draw the highest number of people and schedule open houses accordingly.
  • Pay attention to market trends. NHSSF asked homebuyer education clients what they wanted and took those responses into account when developing the product. The organization focused on meeting prospective buyers’ preferences and providing an excellent product that fits in the neighborhood. This approach can sometimes be more expensive than other alternatives, but providing a good product that meets buyers’ needs will ultimately strengthen the organization’s reputation and support its goals. NHSSF does not have trouble finding buyers because it offers them what they want: a great product at a great price.

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